Limiting corporate tax deferral could raise $114 billion: CBO
WASHINGTON (Reuters) - If U.S. corporations' ability to defer taxation of their foreign profits were limited, as the White House favors, tens of billions of dollars in new government revenue could be raised over a decade, congressional researchers said on Tuesday.
In a report that could fuel the debate about how to tax U.S. multinational companies, the Congressional Budget Office said changes of the sort backed by the White House "would boost both efficiency and tax revenues," raising about $114 billion in 10 years.
That would exceed new revenues available under another approach favored by many corporations. A "territorial system," as promoted by corporate lobbyists and Republicans in Congress, would raise $76 billion in a decade, under one estimate cited by the CBO.
"Countries with territorial ... tax systems collect less tax revenue," all else equal, than countries that tax all corporate profits - foreign and domestic - the same, CBO said.
Congress for months has been laying the groundwork for an overhaul of the U.S. tax code. This may be less likely to happen now that the "fiscal cliff" deal of last week - which raised ordinary income taxes on affluent Americans - has hardened Republican opposition to considering even more tax increases.
But some aides on Capitol Hill still see a corporate tax revamp as possible and various related studies continue to be done.
At the moment, big corporations must pay the top 35-percent corporate tax on foreign profits, but not until those profits are brought into the country from offshore. This exception is known as corporate offshore income deferral.
Because of it, $1.6 trillion in earnings was parked overseas by 290 large U.S. companies at the end of 2011, according to Citizens for Tax Justice, a left-leaning tax think tank.
Corporate lobbyists last year failed to convince Congress of the need for a repatriation tax holiday that would have let them bring those profits home for little or no tax.
Under the territorial approach backed by many corporations, companies could bring foreign profits home with little or no corporate income tax imposed on a permanent basis, not just during a temporary, one-year holiday.
President Barack Obama and fellow Democrats generally opposed the holiday idea and have been cool to the territorial approach. But they agree with Republicans and many businesses that the 35 percent corporate tax rate - among the world's highest - should be cut.
The non-partisan CBO did not make a formal recommendation on any particular corporate tax method.
- Islamic State issues video of beheading of U.S. hostage |
- U.S. military strike in Somalia targeted al Shabaab leader
- Marilyn Monroe sex film to be kept private |
- Actress Jennifer Lawrence contacts authorities after nude photos hacked
- Ukraine accuses Russia of 'undisguised aggression' as rebels advance |